Before doing an audit of your employee turnover rates in 2021, it’s vital to examine employee turnover rates by industry. You may know the overall average (47.2%), but the context of your industry likely completely changes the way you should consider your annual numbers. Before we get to 2021’s turnover rates by industry, however, we should know a little bit about turnover in the first place.
What is turnover?
Turnover refers to the percentage of your employees that leave your company during a certain period of time, often a full year. In this instance, we’re looking at all types of separations from a company (including retirement) but sometimes HR departments will exclude the unpreventable reasons for departure in order to focus on what’s preventable. Turnover does not include intra-company movement like promotions or transfers, as they remain within the organization.
Turnover is also a business killer. When it’s higher than a company is prepared to handle, it can be incredibly expensive and inconvenient. It slows productivity due to a lack of experience filling the workplace, and it hurts financially because of the high expenses associated with constant recruitment. In fact, industry expert Josh Bersin estimates that replacing an employee can cost 1.5x-2x their salary.
A myth about turnover is that it’s the inverse of employee retention; if the turnover rate is 20%, that would mean the retention rate is 80%. That’s on the right track, but ultimately not true due to the difference in the way they’re calculated. The difference could be small, but it could disguise a larger problem.
How Turnover is Calculated
There are two main differences between calculating retention rates and turnover rates. Most importantly, turnover rates include new hires, while retention rates don’t. A lot of turnover is found in new hires who either quickly determine they’re not a good fit for the company, or quickly demonstrate they don’t belong at their position at all.
The other difference is in their typical categorization – turnover usually includes involuntary departures like retirement and terminations while retention usually doesn’t. When you’re looking at turnover, you want a plain and simple picture of who’s leaving the company and how often.
While the definition of turnover is straightforward, calculating the rate isn’t quite so easy. The formula is as follows:
Turnover Rate = # of Separations / Avg. # of Employees x 100
What may stand out to you is the “average # of employees” bit. Let me explain:
SHRM recommends counting the monthly turnover rate and adding each month up to come up with the annual rate. This is because it gives you a clearer picture of when turnover was highest and why – and, believe it or not, it makes the equation a bit easier.
Let’s say a company named Employee Retention-opolis had 20 separations and 16 new hires in 2021, going from 200 employees to 196. The average number of employees, month by month, is 198. If 6 employees happened to leave in July, that would be six separations/an average of 198 employees for a 3.3% turnover rate. That’s on the higher side for them, but they might have had a month with 1 departure, for a .5% turnover rate. Adding all these months up would result in a 9.6% turnover rate, which is excellent for Employee Retention-opolis.
Now, without further ado, average turnover by industry in 2021, provided by the Bureau of Labor Statistics.
Construction – 56.9
Manufacturing – 39.9
Trade, Transportation and Utilities – 54.5
Information – 38.9
Financial activities – 28.5
Professional and Business Services – 64.2
Education and Health Services – 37.3
Leisure and Hospitality – 84.9
Government – 18.0
Other – 47.2
As high as these seem, they’re much closer to the pre-pandemic average than we saw the year before. We saw annual rates as high as 130% in 2020!
Our biggest outliers come from the bottom of the list. Leisure and Hospitality, which includes the casual food service industry, comes in at 84.9%. On the other end of the spectrum with a turnover rate of 18% are government positions, illustrating why they’re known for their job security. The “other” category is 47.2%, which coincidentally exactly matches the overall average.
Even though that overall average is 47.2%, as you can see from this list of average turnover rates by industry, you probably shouldn’t be holding your company’s rate against it. If you’re in the financial district, a 35% turnover rate would be great compared to the overall average but poor alongside the financial average. If you’re in business, 55% is bad for the average, good for business. Getting a more specific perspective is important.
Now the question becomes: how do we fix our turnover rates?
Step 1. A Great Onboarding Process
When you want your team members to stick through to the end, you have to start at the beginning. Research by Brandon Hall Group discovered that organizations with a strong onboarding process improve employee retention rates by 82% and overall productivity by 70%.
A great onboarding experience is quick, informative, and teaches about more than just daily tasks and industry practices. They should also tell new hires about the company’s culture and how they can both contribute to it and thrive within it. We’ve all been through training procedures that made us question our job before it even started – make sure your organization’s onboarding process gets team members eager to represent the company as they learn more about it.
Step 2. The work-life balance
Over 25% of employees who work at organizations that don’t support a healthy work-life balance are planning to leave within the next two years, per Hay Group. Companies with the best employee retention programs tend to put that balance high on the list, which results in only 17% of employees planning to leave by the same metric.
Work/life means different things to different people. For some, the COVID pandemic meant they’d have an easier time balancing the two thanks to their new home office environment. For others, the balance tipped the opposite direction due to more hours and less vacation time. If you want to boost employee retention with the best employee retention strategies, you have to listen to what your team wants.
Giving extra vacation time to those who need it and remote days to those whose home situations would benefit from it goes a long way in lowering employee turnover rates and improving your organization’s overall employee experience.
To learn more about the steps of employee retention, check out our article, How to Retain Employees in 2022! We have a lot more on the subject as well – take a look at our e-book on Mastering the Employee Experience, or our 10 HR Strategies For the Retention Crisis piece, as told by experts from many of the industries we discussed above. All of our resources can be found in our Library – check them out here! To see HelloTeam, the employee retention platform, in action, click here — and to book a demo with us, go here!